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Title: Do Better Schools Lead to More Growth? Cognitive Skills, Economic Outcomes, and Causation

Citation Type: Working Paper

Publication Year: 2009

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Abstract: We provide evidence that the robust association between cognitive skills and economicgrowth reflects a causal effect of cognitive skills and supports the economic benefits ofeffective school policy. We develop a new common metric that allows tracking studentachievement across countries, over time, and along the within-country distribution. Extensivesensitivity analyses of cross-country growth regressions generate remarkably stable resultsacross specifications, time periods, and country samples. In addressing causality, we find,first, significant growth effects of cognitive skills when instrumented by institutional featuresof school systems. Second, home-country cognitive-skill levels strongly affect the earnings ofimmigrants on the U.S. labor market in a difference-in-differences model that compareshome-educated to U.S.-educated immigrants from the same country of origin. Third, countriesthat improved their cognitive skills over time experienced relative increases in their growthpaths. From a policy perspective, the shares of basic literates and high performers haveindependent significant effects on growth that are complementary to each other, and the high performereffect is larger in poorer countries.

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Authors: Woessman, Ludger; Hanushek, Eric A.

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Publication Number: 2524

Institution: Center for Economic Studies

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Publisher Location: Munich, Germany

Data Collections: IPUMS USA

Topics: Education, Labor Force and Occupational Structure

Countries: United States